Indian Finance Minister urges officials not to hound taxpayers

Reuters: Indian Finance Minister Palaniappan Chidambaram urged officials on Tuesday not to hound the country’s taxpayers, despite the pressure the officials are under to meet the annual tax targets as the economy faces its deepest slump for nine years.

“We are not going to be regarded as a hounding tax administration,” Chidambaram told reporters after a meeting with the top tax officials dealing with import duties, service tax and factory gate duties.

“We will be friendly to those people who are tax compliant and I believe the bulk of people pay taxes,” he said, adding that a massive awareness campaign would be launched soon to increase tax compliance.

An investor backlash forced the government in May to defer until 2013 the implementation of a set of General Anti-Avoidance Rules (GAAR) that was introduced in the annual Budget in February

He said the Government was planning to have another look at the proposed tax law changes next year, including GAAR and retrospective measures broadly intended to target Vodafone’s purchase of Hutchison Whampoa’s Indian assets.

The GAAR targets firms and investors routing investments through tax havens, but a lack of clarity on its implementation panicked foreign investors, heightening caution about investing in India as they feared the new rules could be abused.

The Finance Minister also told tax officials the Government could meet the indirect tax receipts target of 5.05 trillion rupees for the current fiscal year 2012/13 ending March by focusing on big taxpayers. The top 100 taxpayers in each tax unit contributed about 95 per cent of taxes, he said.